Greenbrier Cos.: “Strong” fiscal 2Q results

The Greenbrier Cos. Monday reported net earnings of $17.7 million, or 57 cents per diluted share, in its fiscal second quarter ending Feb. 29, 2012, compared with a net loss of $550,000, or two cents per diluted share, in the comparable 2011 quarter.

The Lake Oswego, Ore.-based company logged second-quarter revenue of $458.2 million, up more than 60% from the $284.3 million in the second fiscal quarter of 2011. Adjusted EBITDA for the quarter was $40.1 million, or 8.7% of revenue, compared to $19.4 million, or 6.8% of revenue, in the second quarter of 2011.

New railcar deliveries in the second quarter of 2012 were 3,700 units, compared with 2,200 units in the second quarter of 2011, the company said. As well, the company received orders for 3,600 new railcars, more than double the 1,600 orders received in the first quarter. Subsequent to quarter end, orders were received for 2,300 additional units valued at $270 million.

Greenbrier's new railcar manufacturing backlog as of Feb. 29 was 12,500 units with an estimated value of $1.1 billion, compared with 13,300 units with an estimated value of $1.1 billion as of Nov. 30, 2011, the end of the company's first fiscal-year 2012 quarter.

President and CEO William A. Furman said, "Our strong quarterly results were driven by revenue and margin growth in all of our business segments, as compared to both the second quarter of fiscal 2011 and the first quarter of fiscal 2012. We expect to continue to benefit from efficiencies of operating at higher volumes."

Furman continued, "Manufacturing orders increased during the second quarter and remained robust during the first part of our current quarter. As a result of momentum across multiple railcar types, we continue to diversify our product mix. We remain optimistic that we are in the early phases of a broad-based recovery in the rail markets we serve."

The Greenbrier Cos.' Manufacturing segment, consisting of marine and new railcar production in Europe and North America, recorded second-quarter revenue of $320.2 million, compared with $156.6 million in the second fiscal quarter of 2011. The company attributed the increase primarily to increased new railcar demand, which drove higher railcar deliveries.

The Wheel Services, Refurbishment & Parts segment reported second-quarter revenue of $119.9 million, up from $112.0 million in the second quarter of 2011, and attributed mostly to higher sales volumes and an increase in scrap metal pricing. The company's Wheel Services segment, with a network of 40 locations, provides wheel services, repairs and refurbishes railcars, and provides railcar parts across North America.

Despite the company's professed confidence, Wall Street reacted negatively to the news. Shares of The Greenbrier Cos. were up 2.3% to $20.15 in mid-morning trading Monday on the New York Stock Exchange, but ended the day down 6.4%, following a company conference call. Shares continued sliding early Tuesday, falling another 7.3% to $17.10.

During the call Monday, Furman acknowledged that The Greenbrier Cos. was seeing a slowdown in its exploration and production activities, affecting short-term demand for sand-carrying cars, used to transport sand for hydraulic fracturing (fracking). "There has been a slowing down of the frantic pace," said Furman. "An awful lot of cars have been ordered; an awful lot of production is in play. So I think there's just a pause as people calibrate their demands."

But in an analysts' note Tuesday, Keybanc Capital Markets Inc.'s Steve Barger and Alexander Walsh said the market's negative response was overwrought. "In our view, the railcar manufacturing industry is in the middle stages of the ongoing recovery, which is typically characterized by improved production visibility, higher levels of manufacturing, and operating margins expansion," they wrote. "As such we found the pessimistic market reaction overdone on what is an in line to slightly ahead of consensus quarter with decent order momentum."